POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

Sta. Mesa, Manila

Upgrading an ERP

Software Engineering / Enterprise Architecture Development 1st Semester SY 2013-14

Master of Science in Information Technology

Submitted by:

Christian Bryan C. Estrito

CHAPTER 1 Introduction

No matter what business or industry you are in, at some point someone will ask, Is it time to change our ERP, or should we continue with our current system? This is not an easy question to answer. If you decide to keep your current system you risk falling behind technologically and functionally. On the other hand, if you decide to change your ERP, you will be faced with making a large investment, undergo varying degrees of disruption to you organization, and risk a failed implementation.

What is the right answer for your company? Each companys evaluation process led it through examinations of its own unique problems. Each had different reasons for staying on their current system or for making a change.

So if you were working in your company at the time when your present ERP was installed, you would remember the changes, the turmoil and the complexity. Installing and getting to use the ERP was not a trivial process. But software has a life and sooner or later it will be time to change or upgrade your current ERP solution as well.

The decisive moment for change does not come with a sudden flash of inspiration or a cataclysmic event. Over time, your existing solution begins to lose its crispness and a slow decline in its capabilities begins to set-in. Competitors begin to gain a slight edge that will continue to increase if the situation is not corrected. Perceptive managers recognize this decline early; others will only see it when the results show up in the bottom line. But at some stage the decline will be evident.

Whether you are contemplating a first time purchase for your entire company, expanding into a new territory currently not supported by Enterprise Resource Planning (ERP), or deciding whether to replace your existing ERP solution, its a big decision. For decades ERP

implementation in general, and more specifically ERP replacement, has been compared to brain surgery. You just dont do it unless the patient is dying. But today the better analogy is joint replacement. You suffer with that bum knee or hip until you cant stand the pain any longer, or you simply cant function properly. Apply these same principles to your next (or first) ERP purchase. Suffer along if the status quo is good enough. But what if its not? Sure there will be some recovery time required; plan for it. But with careful selection and planning and aggressive goal setting you too can be operating pain-free and better than ever by implementing a new ERP.

CHAPTER 2 Review of related literature We see it every day with our current and prospective clients: company installs ERP system, it costs more time and money and causes more pain than it should have, and after years of usage, the business and software become misaligned. When this happens, the CIO or COO will inevitably call us insisting that the software is broken and that its time for a new solution, leading to an evaluation and selection of new ERP software. It may sound crazy, but one of the first questions we usually ask is, Do you really need a new system? After all, it can take some time and effort to select new software, and implementations are costly and risky. Many cases do involve a legacy system thats just not a good fit for the business and never will be, but if it makes sense, a rejuvenation of the existing solution can be less risky, less costly, and less disruptive to an organization. After some digging and analysis, we often find that companies are leaving a great deal of low-hanging fruit on the table that can easily be addressed by simply conducting refresher training, tweaking businesses processes, making updates to the software configuration, or in some cases, upgrading to a new version of the software. Before heading off the deep end and assuming you need a new ERP system, it is helpful to ask a few key questions to start: Is your ERP system really the problem? Although we have plenty of clients that are in dire straights with their current legacy enterprise software, I would estimate that the software itself more often than not the real problem when a company first contacts us for a software evaluation. Even if it was implemented well, which most of the time it isnt, ERP software tends to get misaligned with evolving business needs over the years. Instead, look at how well your business processes are functioning, how competent your employees are with the business processes and systems, and the cost-benefit of doing some reconfiguration or upgrades to the software.

Are you running the latest version of the software? The evolution of ERP at most organizations is pretty common: the slow misalignments mentioned above build up until the company finally stops upgrading the software, which further exasperates the problem. We see clients that havent upgraded in several years, only to wonder why the software is dated and unable to meet their key business requirements. Although upgrades are never really simple, they can be a lot simpler than a full rip and replace of the system.

What is the best way to align your business with your ERP software, and vice versa? The final question is to ask what else could be done to align business and software. What are the different available options and what is the estimated return on investment for each scenario? We often help clients look at the costs vs. benefits of several scenarios, such as process improvements or implementations of advanced modules of the current system, before making a final recommendation. Even if you are leaving some potential benefits on the table by sticking to your current system, the potential lower costs and risks combined with the overall return on investment may justify that approach.

In the study of Software Resources together with Microsoft Dynamics for the research of Is it Time for a New ERP System? Five Drivers of Change. No matter what business or industry you are in, at some point someone will ask, Is it time to change our ERP, or should we continue with our current system? This is not an easy question to answer. If you decide to keep your current system you risk falling behind technologically and functionally. On the other hand, if you decide to change your ERP, you will be faced with making a large investment, undergo varying degrees of disruption to you organization, and risk a failed implementation. What is the right answer for your company? Over the past 15 years, SoftResources has helped hundreds of organizations traverse the software selection process. Each companys evaluation process led it through examinations of its own unique problems. Each had different reasons for staying on their current system or for making a change. In many cases their decision boiled down to five drivers of change.

Business Processes - As you evaluate your ERP system with regard to business processes you should first assess the level to which any bad business processes are forced on you by your ERP system; and then identify the number of sidebar systems users have created to work around your ERP. If you find significant process issues in these areas, a change to a modern ERP system may be beneficial to your organization. The functionality and capabilities inherent in your ERP software have a big impact on your business processes. As you assess the effectiveness of your current system, you must first review your core business processes to determine if they enable maximum efficiency and productivity. If they do not, investigate whether the software system imposes constraints on your processes. Are your users saying, I do this because thats the way the system makes me do it? When ERP systems were introduced 20 years ago, they were rigid in their functionality. They forced companies to conform business processes to the dictates of the software, or required them to significantly customize the software to meet their specific requirements. However, business processes evolve over time while the software remains static. This causes a disparity between the way the software was originally implemented and the new requirements of the business. This evolution continues until you get to the point that the processes in the system actually constrict the ability of users to efficiently run your business. In common with the CEO mentioned above, this is a major reason why your company might end up implementing a new ERP system. New enterprise software applications offer flexible business processes based on best practices and process tools such as workflow. Workflow is the ability to set up and change process flows within the system. It includes many capabilities such as electronic routing of documents, event notification, and automated processes based on triggers. Many ERP vendors offer flexible rulesbased workflows that allow businesses to create custom processes based on their operations. These workflows can be changed as their preferences and requirements evolve. In some of the more sophisticated systems, power users are even able to diagram and implement new workflows with drag-and-drop technology. Such flexibility allows the ERP system to evolve with changes in business processes and practices in your company and industry.

Creation of Sidebar Systems When users feel that inefficiencies in the ERP system have become too burdensome, they find other ways to get their jobs done. It is only human nature that individuals take it upon themselveseven when not authorizedto find workarounds through sidebar systems that improve their personal productivity. Such sidebar systems are typically created using outside tools such as spreadsheets and databases. These systems give workers control of data but also form isolated islands of data. The result is redundant systems, duplicate data entry, and the need to reconcile the systems to mitigate the increased possibility of errors. In some cases, management is not even aware sidebar systems exist. As you analyze the efficiency of your current system, you need to identify what work is being done outside your ERP system. The more spreadsheets and databases you find, the better a candidate you are for a new system. A new software implementation can bring many benefits to organizations that have many of these sidebar systems. First, a modern ERP system enables all key data and information to be input into one central database allowing for ease of reporting, and minimizing the chance for errors. Next, engaging in the selection process allows the organization to come together as a whole. Users are empowered when they have participated in the requirements definition discussions. They take ownership of the implementation because they have contributed to the decision. Finally, a new implementation gives you a fresh look at your business processes. As you plan your implementation there should be a balance between changing established processes in order to take advantage of the inherent capabilities of the software versus software modifications to fit key functionality required by your organization. Business Process Key Considerations As you assess the effect of your current ERP software on your business processes, you should consider the following questions: Do your current business processes decrease efficiency and productivity? Are they in place to make up for inefficiencies in the ERP system? Have they been dictated by the system because of lack of functionality?

Have your business requirements changed over the years making the reasons you selected your current system no longer valid? Have users created many sidebar and workaround systems outside the ERP?

Implementation of a flexible ERP system allows your company to take advantage of new capabilities, functionality, and fresh ideas. An implementation partner that understands your industry is an excellent resource for efficiently implementing the system and effectively setting up your business processes. Selection and implementation of a modern ERP system can reduce manual processes, eliminate redundancy, and reduce paper documentation giving your company the opportunity to: Review all business processes in place and determine which are required, which can be modified, and which can be eliminated. Identify and eliminate redundancy and manual data entry. Standardize business processes across all departments. Adopt the best practices available in new software to obtain greater efficiency over the current ways of doing business. Make use of flexible workflow functionality to take advantage of automated business processes, document routing, events, and alerts. System Technology Software technology changes quickly. A great example of this is that in a matter of only a few years, user interface technology has progressed from the green screens of the 1980s, to Windows point-and-click graphical user interfaces of the 90s, to the Web browser look and feel of today complete with hyperlinks and full text search bar. This means you need a software system that keeps pace with new technology to enable you to remain competitive. As you assess the technology of your ERP system, the key drivers of change are integration, availability of support and resources, and customization. Integration Many companies on older ERP systems have multiple ancillary software systems that handle various aspects of their business because they have either enabled departmental autonomy for

their systems, or they have requirements that the core ERP software vendor was unable to provide at the time they bought their systems. The data from these systems must be passed to and from the central financial or ERP system. Companies that lack comprehensive systems integration have difficulty managing data in multiple locations, have additional costs to upgrade software from multiple vendors, and have to employ IT personnel that are focused on maintaining integrations between systems. In recent years, modern ERP systems have tried to solve these integration problems by expanding their functional capability. The goal is to be a one-stop-shop of integrated functionality to replace disparate standalone systems. To further extend functionality, ISVs (independent software vendors) offer industry-specific add-ons that are tightly integrated to the core ERP application. For those organizations that still require third-party applications, ERP vendors offer APIs (application program interfaces), which are strong integration tools that facilitate integration. Availability of Support and Resources As you evaluate the technology of the software you are using, you need to consider the resources that will be available to support you for the next seven to twelve years. Your current IT personnel have invested time gaining expertise in the technology of your current systems. Some will embrace a change to newer technologies. For others a change in technology may be extremely difficult. In fact, we have seen employees leave organizations because of a technology change. You will need to know the culture of your IT personnel to determine if a change in technology would be possible. Finding future resources to support your technology may also affect your decision. Colleges and universities no longer teach some older technologies causing a dwindling number of people able to support them. Keep an eye on your technology and the resources available to support your systems for the long run. Customization In the early days of computers companies would build custom software from the ground up to run their business. This created a very functional system but one that was built without thought for technological upgrades or the possibility of integration with newer systems. These systems

had a tendency to be so narrowly focused on specific requirements that changes in business processes or industry direction would quickly render them inefficient. As ERP systems became more prevalent in the 1990s, companies found that while ERP software provided most of the general functionality they needed, there were certain requirements that were not available out of the box. Vendors offered customizations to meet these specialized requirements that required changes to the source code, but ended up taking the company off the upgrade path. This meant that over time, the company was left with outdated functionality and technology, and no support. Other challenges for companies with customized and custom developed applications include: Newer ERP systems have made great strides in offering expanded functionality for unique requirements. Moreover, they offer tools to modify the software rather than customize it. Modifications allow your company to make changes to the software independently from the source code. Customer defined fields are built into the system that allow for entry and reporting of unique data you need to capture. The net effect is that modifications can be made to the software without moving off the upgrade path enabling you to take advantage of new capabilities and technologies without losing the key functionality you need to run your business. Software Technology Key Considerations As you evaluate the impact your technology has on your organization you should consider the following questions: Is the technology you are using an asset for your company? What integration issues do you currently have? Can they be alleviated by having a single ERP solution? What are your IT staff capabilities? Are they willing to change to a new technology? What other support resources are available for the technology you are using (or considering)? Have you customized your software so much that you are off the upgrade path and lack support for your version of the software? Buying a new business software system should give your company the ability to:

Take advantage of new capabilities in order to make technology a competitive advantage for your organization. Make modifications while remaining on the upgrade path. Keep up with the technology requirements of your industry. Identify and eliminate redundancy and manual data entry in multiple systems. Obtain more accurate data.

The ERP technology should be a strategic asset to your organization. You should be able to take advantage of key technology advances to increase your ability to serve your customers and increase revenue. When you buy an ERP system, you are not just buying a static product. You are actually forming a relationship with the vendor in which they continue to develop and support the software in a manner that will be helpful to you for many years. Software Vendor Sometimes the reason a company changes its ERP system has nothing to do with the software itself or the business processes associated with it. It has to do with what is happening with the software vendor. Two key factors have a big impact on the decision of many companies to move to a new system, the vendors software development and support, and the effect of a vendor acquisition or merger. Software Development and Support When you buy an ERP system, you are not just buying a static product. You are actually forming a relationship with the vendor in which they continue to develop and support the software in a manner that will be helpful to you for many years. Your annual maintenance fee funds new functionality, technology updates, and support. As you evaluate your current system, you should investigate what the vendor has done to enhance the product both functionally and technologically, focusing on whether the enhancements are meaningful for your organization. You are paying a significant annual

maintenance fee and you want functionality and technology that is useful to you. Have the improvements been a strategic asset to your organization, or is the vendor creating new functionality that does not match what you need? Vendor support is another key element to consider. When a company feels it is not getting proper support from its vendor, it begins to look at other support options. This may include bringing support in-house or looking for some other third-party support organization. If dissatisfaction with the vendor becomes too great, some companies end up discontinuing their maintenance payments. They may find it too costly, have too many customizations, or do not see the value in being on the latest version of the software. Over time, the system becomes outdated and they get to the point where their version is no longer being supported. The company gradually loses operational efficiency and eventually finds they are so outdated and have so much risk of data loss and system failure that they begin the search for a new system. ERP Vendor Acquisitions In the past decade, ERP software vendors have gone through a large number of mergers and acquisitions that have altered the vendor landscape. This has resulted in change of ownership of many software packages. ERP vendor mergers directly impact every user of the software products involved. When acquiring other companies, software vendors have different strategies for the ERP systems they buy. In some cases they continue to sell, maintain, and upgrade the system as if it were a standalone company. This means very little change in their relationship to their customers. In other cases, they acquire products for the user base, and although they continue to support the product for a time, they do not invest in or improve it. The goal of this kind of acquisition is to move the user base to another product in the software vendors portfolio. To do this, they offer a reduced migration fee and then milk the user base for maintenance fees until the majority of users leave the system and the revenues being collected no longer justify the cost of continued support. At that point they begin to sunset the application and users are forced to either change to one of the software vendors other products, or select a new vendor.

Right after your software product has been acquired by a competing vendor it is usually very difficult to predict what will happen. The vendor may not even have thought out a strategy for the product yet. This means that you have one or two years when you will not experience a significant change in support. But as time passes, and the vendors strategy becomes solidified, you will notice changes to their culture, direction, and support. At that point you should evaluate whether the vendor is still a match for your company or whether the ownership changes warrant selection and implementation of a new system. Software Vendor Key Considerations As you evaluate the impact of the software vendor on your ERP system and organization, you should ask the following questions: Have upgrades to the functionality and technology been useful to your organization? Do upgrades take a lot of resources, time, and money to implement? How well has the vendor supported you? Is the software vendor financially stable? Are they a takeover risk? What is the history of the software? Has it been acquired multiple times? Is the vendor maintaining good sales momentum or are they simply supporting older customers? Do you feel comfortable working with this software vendor? Are they a cultural match with your company? These questions are not entirely quantifiable. Indeed, some of the answers will be based on gut feeling. Evaluating a software vendor is more than just evaluating their software product. It is an evaluation of peoplehow well you work with them and how well they support you. A stable vendor with a good install base, a continuously developing product, and close cultural fit can be a strategic asset to you for many years. Buying a new business software system should give your company the opportunity to: Maintain a relationship with a software vendor that will develop the functionality and technology of most interest to your organization.

Get proper support for your ERP investment. Have a financially stable vendor to support your software for many years and mitigate the risk of acquisition. Help you focus on getting a good culture match for your company.

Reporting Reporting is one of the biggest reasons companies move to a new software system. Older ERP systems collect data very well, but have difficulty retrieving data for reporting purposes. In order to make an ERP system a strategic asset, the data that resides in the system needs to be output in a usable form in order to make timely and informed decisions. The key issues faced by companies with regard to reporting are ad hoc queries, reporting delays, and graphics. Ad HOC Queries Ad hoc queries are one of the most limiting factors of older ERP systems. Many organizations find that generating reports is cumbersome and time consuming. Because older systems rely on preconfigured reports, creating a different view of the data is very difficult. If management needs a non-standard report, IT personnel are frequently required to create it. This takes them away from other projects and work activities. In fact, some organizations have an IT group whose sole purpose is to write and run reports for executive management. Modern ERP systems offer very flexible reporting capabilities. In fact, these reporting capabilities have become so user friendly that with minimal training, end users can actually put together their own ad hoc queries on the fly. This has enabled executives and users to report on data without having to ask IT personnel for assistance. Ad hoc reporting and analytical capabilities allow users to produce reports for executive management, financial management, operations, and industry and government regulatory requirements. In addition to the standard reporting query capabilities, integrations to tools such as OLAP (online analytical processing) allow you to export data to a data cube that can be used to slice and dice your data in different ways, providing innovative views into the performance of your company.

Reporting Delays In order to facilitate transactional efficiency, many older systems reports are run in batches, usually overnight after the data in the system has been updated. This means that data is not available on a real time basis. Queues can get backlogged during heavy reporting periods such as year-end close. This can be a significant limitation when a quick response to changes in policy, procedure, \or customer demands is required. Modern ERP systems offer the ability to query data at any time. This provides real time data to management immediately when needed. Executive dashboards are also available that display critical reports and information on the desktop to enable executives to monitor conditions by the minute. Workflow alerts can be set up so that when key metrics change, a report can immediately be sent to the responsible personnel enabling real time actions to efficiently manage and run the business. Graphics It is much easier to see trends and areas of concern in graphical format rather than the long lists of numbers older systems print out. Because older systems do not offer convenient ways to provide graphical reports, users end up re-keying data into spreadsheets and other desktop productivity tools that offer graphical presentation capability. Modern ERP systems offer significant built in graphical reporting capabilities. Reports can be formatted on a real time basis and run as often as necessary. Because many people still use spreadsheet tools such as Excel to manipulate data, most vendors have developed one-button import/export links to these tools. Reporting Key Considerations As you evaluate the impact of reporting on your ERP system and organization, you should ask the following questions: Do you get the reports you need to manage your business? How are ad hoc queries run? Does IT need to support them or can users run their own reports?

What does it take to get your reports? Is there a lot of work behind the scenes to gather the information necessary? Are reports delayed due to limitations of the system? Do you get graphical reports that enable you to quickly pinpoint trends and variances? How easy is it to export data to outside tools like Excel?

A new business software system should provide your company with: A library of predefined reports with the ability to modify queries. Simple ad hoc query tools that allow even the most technology-averse employees to format and create their own reports. Access to data and reports on a real time basis. Dashboards that display critical information for decision makers on a continuous basis. Consolidation and presentation of data in graphical form without resorting to external systems. Links to spreadsheet and other database tools for manipulation of data and formatting of reports. Integration to more robust third-party data analysis and reporting tools such as OLAP. Reporting is one of the most important benefits of implementing a new system. The ability of modern ERP systems to extract and manipulate data on a real-time basis gives management an effective tool to make decisions for the organization. Total Cost of Ownership Total cost of ownership (TCO) is the accumulation of all costsnot merely software costs or IT costsassociated with making a system carry out its purpose. Many organizations have no idea what the total costs are to operate a system because only a handful of costs are hard, quantifiable costs. Hard costs such as software license fees and maintenance fees can be easily defined and are readily accessible. Soft costs are not readily visible as out-of-pocket costs, but cost the organization in terms of productivity and time. Soft costs are subjective and based on estimates. A full analysis will require you to examine how your organization uses the ERP system and all the ancillary pieces that make the system work. You have to apply hourly rates to

people and their activities, and estimate the time required to perform certain functions. Evaluating soft costs forces you to place a dollar value on intangibles. In fact, if you were to just look at hard costs, a new ERP system will typically appear to be the more expensive option. However, as you evaluate the total cost of your system, accounting for both hard and soft costs, you may find that a new system is warranted because of the productivity gains, time savings, and increased revenue opportunities that a new system brings. According to the article of Five Reasons its Time for a New ERP Solution from Corporate Business Products: Switching your ERP solutions has many benefits too. Once the dust has settled you could have many enhancements to your processes and improved efficiencies may result. However, the reasons for the switch have to be carefully debated and the migration path clearly planned out. The Five Most Important Reasons to Change Your ERP Software The existing ERP forces a work plan which is not right for your business the first indicator of a need to change is when you find that your people are adapting your business processes to fit the ERP, and the adaptation is very clearly not the best fit for your business. Obviously, this was not the case when the ERP was first installed. At that stage it represented the best practices in vogue. However, over the years best practices evolve and if your ERP is not adaptable or flexible enough to incorporate the new best practices, then it is evident that either your people will have to make do with obsolete processes or they will need to find workarounds. If you are living with inefficient processes, you would be lesser efficient than you should be and will be losing out to competitors. If you see this happen with regularity, then obviously, it is time to change the solution you are using. The next red flag is when people start working outside the ERP system when the ERP you use no longer reflects the reality of your business, users start creating their own methods of working. Take a situation where the business adds a process or a product line that cannot be accommodated by the legacy ERP system. Under such circumstances, users will go back to their spreadsheets and private databases. This creates an island

inside your company that is isolated from the ERP software. As a result, silos of information would be created that the main system does not know anything about. It also creates reporting inconsistencies and the system loses accuracy this is the very thing the ERP was designed to eliminate. If you find this is beginning to happen to your system as well and the vendor is unable to provide support it is a sure sign that it is time to change your ERP system. Costs - Your business is dynamic and grows. You may have calculated the total cost of ownership with great care when you first purchased the solution. However, with the addition of new divisions and the pruning of some old ones these calculations will not be relevant any more. Newer ERP solutions, especially those with using the pay as you go cloud based software as a service model are priced very differently as compared to legacy systems. Modern licenses are flexible and highly competitive. While you will not base your decision on costs alone, it is important to be aware of how much a new system will cost you as compared to what you are currently using. Cloud Computing - you may not be very familiar with the cloud and may not have plans to move to the cloud just yet, but it is only a matter of time. The cloud has already changed the way many companies work and soon you will be moving some part of your processes to the cloud too if you want to stay competitive. With legacy ERP solutions, the software was loaded on your servers and you purchased some licenses to use it. With cloud based systems, the ERP runs in the data center of the service provider and you need nothing more than a PC connected to the Internet. Since very large numbers of users from different companies could be using the same software, costs come down substantially. You do not have to invest in high performance hardware and can increase or reduce the number of licenses you are using with far greater ease and economy than otherwise. Very soon, almost all except niche systems will move to the cloud platform. You need to begin exploring options now rather than being left behind with inefficient processes. The last major reason to consider a new ERP is staffing and vendor reliance. When your current system was new, there were doubtlessly many IT staffers who understood it well.

However, over the years the system has surely been customized beyond the original specifications. Staff turnover would have also occurred and so you would be left with just one or two old hands who understand the system fully and are aware of the customizations that it required. What would happen if they were to leave or be hired away by the competition? If you find that just one or two persons are irreplaceable in your IT setup, it is time the alarm bells rang. Such a situation is a major threat to your business and if the conditions discussed in previous paragraphs also support the situation, it may be time to think of an upgrade where the customizations are built in at the very start and well documented. A similar situation may exist with the vendor who has supported your ERP and your customization. Keep track of the skills available to service your software. If you find the required skills to be becoming more difficult to find, maybe it is time to change to a newer platform. I have seen similar situations in companies where perfectly satisfactory COBOL systems were changed over to Oracle because COBOL skills were becoming extremely difficult to find. Based on the article of Its Time for a New ERP System by armanino: The reasons clients seek to move to a new ERP system are varied and usually multi-factorial but most often include the following. New Functional Requirements - Your current solution no longer meets your current and known to-be functional needs driven by business growth, M&A activity, new business models, products, service locations and/or service areas. New End to End Process Automation Requirements - Your current ERP solution doesnt have the breadth of pre- integrated functionality to enable the end-to-end business process automation as desired. New System Integration Requirements - Your current solution does not integrate as easily as desired with other relevant third party applications or support the import/export of management or operational reporting data needed.

New Technical Accounting Requirements - Your revenue recognition, amortization and depreciation method requirements exceed the capabilities of the current solution. New Global Operations Requirements - Multi-currency, multi-language and/or multi-entity, budgeting/ forecasting and consolidation requirements exceed the capabilities of the current solution. New Scalability Requirements - Business volumes already or will soon exceed the proven scalability of the current solution. Too Many Spreadsheets - When the current solution is viewed as a data repository and Excel spreadsheets the system of record. Auditors frown on it, management doesn't like it and you know your people are wasting too much time manipulating and managing data in spreadsheets. Unacceptable System Performance - Even with a properly sized system, response and processing time is slower than expected and cannot support business needs. System Resource Contention - Your users end of up waiting for each other to finish processing tasks while the other is locked out. Compliance Concerns - Your current solution lacks features to enable SOX compliance like roledriven permissions, configurable segregation of duties, audit trails and other IT controls. When users start managing larger and larger revenue amounts, management and your auditor want more business and IT controls. Business Risk - When not having a complete audit trail of all accounting entries and adjustments is no longer acceptable. System Reliability Concerns - Your current solution has gone down more than expected and/or you worry about the reliability of your vendors proprietary database technology (vs. a more industrial strength database management system (DBMS) like SQL Server or Oracle).

Physical Security Concerns - Your business continuity and disaster recovery plan warrants a more physically secure solution against potential man-made and natural disasters. While hosting or co-locating your current solution in a SAS 70 Type II certified data center (instead of the office closet) is one option, the transition provides an opportunity to upgrade the system as well. Product Obsolescence - Your current vendor has not advanced the product to keep pace with the market or has declared their intent to sunset the product. Service Provider Support Options Become Limited - You are not getting the service level you expect and your support options are few. Its a Logical Transition Point - Before hiring more IT resources, refreshing your current IT infrastructure/ hardware or renewing your current software maintenance agreement, you want to consider reinvesting those funds in a new solution that will better meet your needs.

CHAPTER 3 Analysis

All businesses at one time or another have to weigh the costs and benefits of retaining an older ERP system against the costs and benefits of selecting and implementing a new one. Legacy systems, although on older technology, provide companies a level of comfortcomfort that is likely at the sacrifice of increased relevant functionality and technology. Older ERP systems cause many challenges for organizations. Inefficient business processes are often dictated by these systems and are supplemented by workarounds created by inventive users to maximize personal productivity. Technology is impacted by integration issues, availability of support resources, and customizations that do not allow upgrades for enhanced functionality and technology. Mergers and acquisitions have altered software vendors relationships with their customers. Reporting does not offer timely information to decision makers. Finally, the total cost of inefficient processes and maintenance of a legacy system may justify the cost of implementing a new system to improve efficiency, customer service, and revenue generation. These drivers have caused many organizations to change their ERP systems. But the right answer for your organization will arise from the unique challenges you are facing. As you discover the reasons that other organizations have made a change to their ERP systems, you will be able to evaluate if the timing is right for you to take advantage of the capabilities of modern ERP software.

CHAPTER 4 Conclusion

ERP systems and the process automation and business insight they deliver are a business necessity, but they come with a high level of investment. However, the up-front investment is only a small part of the "story." Meeting changing business needs and modifying the ERP systems to enable those changes can require substantial effort and costs. If this cost was a rare occurrence, it might be acceptable to maintain inflexible systems. Unfortunately, though, the survey shows that meeting business change is an ongoing and regular activity that carries annual average costs of $1 million or more. Other key findings from the survey are as follows: 1. Meeting changing business requirements involves moderate to substantial underlying ERP system changes. 2. Change issues aren't being resolved by newer ERP systems. 3. Customizations, often necessary during the implementation of ERP systems, have longterm risks and implications for ongoing system maintenance. 4. Many companies choose to suffer with managing one or more ERP systems rather than deal with the complexity and costs of consolidation. 5. Due to business changes, 15% of the respondents were forced to re-implement the entire ERP system. Of those, 60% had initially spent over $2.5 million. 6. The cost of system modifications not only is direct but also includes a substantial amount of lost productivity. 7. The average annual costs of maintaining ERP systems and meeting changing business needs are up to $1.2 million, but in the extreme, they can exceed $4.1 million per year. 8. The frequency of change and the subsequent investment to make the ERP system support the business have become so common that many businesses simply accept that there is no better way to operate the business. When evaluating the costs of an ERP system, organizations must look at more than the up-front implementation and licensing investment. In addition to overall fit, the ongoing and often substantial maintenance and costs to keep the system in sync with business needs must be a large consideration in the purchase decision. The system must meet most of the current business needs of course, but it must be flexible and adaptable enough to continue to meet business needs for many years without being a drain on precious resources.

CHAPTER 5 Recommendation

Deciding to upgrade an ERP is indeed a big decision. It can and should have a serious impact on your business, but hopefully in a positive way. Look back at the average cost savings, even for those that were not World Class. Yes, there will be failed implementations. But there will also be those that can be truly classified as successful. Often the same ERP solution is at the heart of both. So while it is critical that you select a solution that fits your needs, it is equally important to give the evaluation, selection and implementation the proper attention to produce that success. Making a selection and running an implementation project when the business is under duress does not create an atmosphere of careful consideration, planning and execution. You will be tempted to take shortcuts that you may later regret. Consider the potential cost savings. Most ERP solutions pay for themselves within a two to three year time period. If capital funds are not available to support the project, consider SaaS deployment with less up front cost. Also, survey respondents with SaaS implementations reached their first go-live milestone 19% faster than those with on-premise solutions. Before embarking on an ERP project, decide which metrics will measure success. Establish a base line, set goals and measure progress against those goals. When you reach them, set another goal. Continue to measure and continue to reap more benefits. An ERP implementation is not easy. But that doesnt mean the business stops during that recovery period. It just means it needs to take extra care to insure a full recovery, with the result being a healthy business that is able to function better than ever.

References:

11 Criteria For Selecting The Best ERP System Replacement - Epicor Is It Time for a New ERP System? Five Drivers of Change - Soft Resources (Compliments of Microsoft Dynamics) Five Reasons its Time for a New ERP Solution - Compare Business Products Maintaining ERP Systems: The Cost of Change - Michael Fauscette (May 2013) IS IT TIME TO PURCHASE A NEW ERP? - Mint Jutras (February, 2012) ERP UPGRADES: WHATS YOUR PHILOSOPHY? 2012 OAUG SURVEY ON ENTERPRISE APPLICATION/ERP SUITE UPGRADE STRATEGIES - Joseph McKendrick, Research Analyst Produced by Unisphere Research, a Division of Information Today, Inc. February 2012 Telltale Signs Its Time for a New ERP System - armanino